Considerations Before You
Refinance
When you're making your decision, there are several things to keep in mind
before you should consider refinancing.
First, even a small rate cut
can pay off quickly. That's because you can easily find
mortgage
companies willing
to waive routine refinancing
charges such as application, appraisal and legal fees (which can add up to
$1,500 to $3,000). Of course, in exchange for low or no up front costs, you'll
have to be willing to accept a rate that's somewhat higher than the prevailing
rock bottom.
Second, if you are planning to
stay in your home for at least three to five years, it may make sense to pay
"points" (a point equals 1% of the loan amount) and closing costs to get the
lowest available rate.
And third, you can avoid laying
out cash and still get a low
rate by adding
the points and closing costs to your new
mortgage. Does that mean shouldering a
lot of extra debt? Not necessarily. If you've had your current mortgage for at
least three years, you've probably reduced your balance by several thousand
dollars. So you may be able to tack your closing costs onto your new loan and
still end up with a
mortgage that's smaller than your original one -- plus, of
course, a lower rate and lower monthly payment.
Mortgage Glossary9
